CIBC reins in mortgage lending after years of torrid growth

Canadian Imperial Bank of Commerce is no longer such an outlier on mortgages.

CIBC has scaled back its rapid expansion of Canadian home loans, bringing it more in line with the industry and ending a two-year streak of outpacing the nation’s other big banks. Mortgage balances rose 6% to C$208.2 billion, ($161.6 billion U.S.) in the fiscal second quarter from a year earlier, the Toronto-based bank said Wednesday in announcing earnings that beat analysts’ estimates. That’s the slowest growth in three years and balances were little changed from the first quarter.

“CIBC produced a solid quarter, which should receive some attention," Barclays analyst John Aiken said in a note. “Aside from a strong beat and an announced share repurchase, CIBC’s domestic residential mortgage growth was essentially flat, potentially relieving a relative overhang on the stock as investors have become increasingly concerned with the bank’s relative exposure.”

Canada’s fifth-largest lender has slowed a buildup of its mobile-mortgage sales force after years of expansion that saw growth of home loan balances surge above 12% last year. Canadian home sales have softened in the wake of government measures to cool the market, including tougher mortgage-qualification rules imposed in January.

CIBC is the first Canadian bank to post results for the period ended April 30. The nation’s biggest lenders are expected to post average earnings growth of 8% for the period, according to Bloomberg Intelligence, lifted by gains in U.S. and international operations, wealth management and domestic banking.

Chief Executive Officer Victor Dodig has sought to diversify CIBC following criticisms that the bank is “too Canadian focused." The lender has the greatest relative exposure to Canada’s housing market, with a higher percentage of earnings coming from domestic personal-and-commercial banking than its bigger rivals.

“Each of our business units performed well," Dodig said in the statement. “We delivered robust earnings growth with continued progress on our strategy to build a relationship-oriented bank.”

Royal Bank of Canada and Toronto-Dominion Bank, the nation’s two largest lenders, report results Thursday, followed by Bank of Nova Scotia and Bank of Montreal next week.

Here’s a summary of CIBC’s quarterly results:

Net income for the quarter rose 26% to C$1.32 billion, or C$2.89 a share, from C$1.05 billion, or C$2.59, a year earlier. Adjusted earnings were C$2.95 a share, compared with the C$2.81 estimate of 13 analysts surveyed by Bloomberg. Canadian personal and business banking rose 16% to C$584 million, while domestic commercial banking and wealth management rose 9.2% to C$310 million. Earnings from U.S. commercial banking and wealth, which includes last year’s acquisition of Chicago-based PrivateBank, were C$138 million.

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